By: MABS Microfinance Specialist Bernabe Bunao Jr.
One of the keys to successful lending operations is to properly screen out clients who are over-indebted or with poor credit histories. This is becoming increasingly important as the sector becomes more competitive than ever before. A useful tool to manage and mitigate these inherent risks is through the practice of credit sharing among lenders. Rural banks are fortunate to have the opportunity to make use of private credit bureaus such as the Bankers Association of the Philippines – Credit Bureau (BAP-CB).
BAP-Credit Bureau offers functional online credit information services that pave the way for quick credit decisions. The technology is homegrown as the tool is in response to rural banks’ requirements that are comprehensive and integrated with a secure database.
Negative File Information System (NFIS)
Among the BAP-Credit Bureau’s bundled benefits is the Negative File Information System (NFIS), a list of clients with adverse findings such as poor repayment history, records of submitting “bouncing” checks, cancelled credit cards, repossessed properties, or loans in litigation, among others. Through this database, rural banks can quickly screen out some potential clients with negative credit histories. And as more rural banks and other creditors join to share negative credit histories of their clients, this database will continue to grow and expand to become even more valuable.
Last year, BAP-CB waived the annual subscription and membership fees for all RBAP member rural banks and reduced the inquiry fee from PhP 11 to PhP 5.60.
Similar Names Inquiry Program (SNIP)
Once a client or borrower’s name is sent online, a matching engine produces a report of all possible names inquired within the last 60 days. The SNIP or Similar Names Inquiry Program of the BAP Credit Bureau is a unique feature that facilitates checking on similar names that the client may have used in obtaining credit from other banks in the past.
Additional perks that rural banks can enjoy upon subscription are (1) free access to their own submissions through the system’s data management function, (2) free maintenance of a personal rural bank database account, and (3) messaging functions along with the NFIS.
Data management is a new facility that rural banks can use as their own credit management system. This facility compiles written-off loan reports sent by the rural bank to the BAP-Credit Bureau. Rural banks can be assured of the security of sending reports to this site since only those with BAP-CB user IDs have access to their own personal rural bank database. This system can also track all inquiries made by the bank’s various branches and even allow the bank to store the credit histories of all their clients, which can then be accessed by any of the bank’s authorized branches.
Rural banks can also use LOANDEX, Real Property Database System (RPDS) and Titles Cautions List Database (TCLD) services, which are all available online. However, these services are charged separately for rural banks that are interested to enroll.
LOANDEX provides a wealth of information among individuals and corporations that have credit dealings among member banks in the BAP-Credit Bureau database. Reports are generated after five working days from the BAP-Credit Bureau site.
Member rural banks can readily access previously inquired individuals or corporations for the last 61 days or more in their database. This service is widely used among commercial banks and is now also available for rural banks, credit cooperatives, and microfinance NGOs. This tool will definitely be useful to help reduce multiple borrowings among the borrowers of rural banks and other microfinance players; thereby, preventing over-indebtedness of clients beyond their capacity to pay.
The Real Property Database System (RPDS) provides rural banks with fair market values of real estate properties in various parts of the country. This is a useful tool for the initial table appraisals among bank appraisers especially when considering real estate properties as collateral for larger SME clients.
The Titles Cautions List Database (TCLD), on the other hand, provides online information about non-existent or otherwise questionable land titles. It serves as a valuable information tool for rural banks which accept land titles as security or collateral. In this manner, rural banks can be guided and protected since banks will be better equipped to screen out potential clients with questionable land title documents.